Two-Pot Retirement Withdrawal: How Much Tax Will You Actually Pay?
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Since the two-pot retirement system launched in September 2024, millions of South Africans have withdrawn from their savings component. But many were shocked by the tax — because two-pot withdrawals are taxed at your marginal income tax rate, not the more favourable retirement lump sum tables.
How Two-Pot Withdrawals Are Taxed
The withdrawal is added to your annual taxable income. SARS calculates your total tax as if your income were salary + withdrawal, then charges the difference. If you earn R400,000 and withdraw R30,000, you are taxed as if you earned R430,000.
Worked Example
At R400,000 annual income, your marginal rate is 31%. A R30,000 withdrawal is effectively taxed at ~26% (the weighted average rate in that bracket range), costing ~R7,800 in tax. You receive ~R22,200 net. At R800,000 income, the same withdrawal costs ~R12,300 (41% marginal rate).
The Long-Term Cost
Beyond the immediate tax hit, withdrawing reduces your retirement fund's compound growth. A R30,000 withdrawal at age 35 — assuming 10% annual returns — costs over R500,000 in lost retirement savings by age 65. The short-term cash comes at a significant long-term price.
Key Rules
Minimum withdrawal: R2,000. Maximum: one withdrawal per tax year. Your fund applies to SARS for a tax directive before paying out — the tax is deducted at source.